With Bitcoin Prices Rising, Here’s What You Need To Know To Be In The Loop

In Crypto News For Newbies, Amanda Razani will present the often (always) confusing and overwhelming world of cryptocurrency news in a way that anyone can understand. Follow along as Amanda learns about bitcoin and crypto and relays what she learns to you (a fellow crypto-newbie) in plain ole’ English.

In the world of crypto currency, Bitcoin is at the top, with the price of one Bitcoin surging over the exciting $10,000 mark on Monday, and continuing to swiftly rise. As of today, just three days later, the coin is worth more than $17,000. That is over triple what it was valued at just two months ago.

This is an astronomical increase in worth in such a short period of time, being driven by a large amount of new investors from around the globe that believe Bitcoin is the monetary answer, able to be held outside of governmental control. I just recently read a story about a guy who sold everything he had to purchase Bitcoin- literally everything. He now lives in a campsite waiting for his big payday with Bitcoin.

But for those who are just now trying to understand Bitcoin and what it is exactly, this news may have you feeling more in the dark than ever. Here’s a short back story about the origin of this cryptocurrency, and how it works.

The first form of cryptocurrency, a form of digital currency that isn’t regulated by government or any central authority, was created by Satoshi Nakamoto in 2008. This first, non-regulated, successful cryptocurrency was given the name, “Bitcoin.”

Bitcoin was the first form of digital money and is the most widely used. The reason for its ever increasing value has a lot to do with why it was made in the first place; security and rarity. Bitcoin, along with most other forms of cryptocurrency, can’t be reproduced. There is only a small amount of Bitcoin available to use for transactions, and that is it. Eventually the supply of Bitcoin will reach an end. Bitcoin is estimated to reach the end of its supply in 2140. Therefore it acts like a limited resource, similar to gold or diamonds.

Bitcoin works via an algorithm. It isn’t necessary to understand the algorithm. What’s important about it is that it limits the amount of Bitcoin available for use, because it involves strong math skills in the field of cryptography to create or “mine” a Bitcoin in the first place, and that money is highly secure once created. It is virtually impossible to steal it, which makes it a very safe form of money to have. And because of how it’s designed, transactions can remain completely anonymous and fast. Bitcoin is used globally and accepted as a form of payment at many big box online stores.

However, even though there has been a surge in Bitcoin purchases this week, many people still doubt the value of cryptocurrency and the likelihood that it will be able to stick around, calling it a bubble. There is doubt that it can avoid government regulation for very long. And many worry about the validity of a currency that is purely virtual. Some fear how secure digital money can actually be. Whereas others doubt that the value of Bitcoin will continue to rise. Many think it will drop back down really soon.

There is talk on both sides of the field, and for each skeptic, there is an investor eager to grab up more Bitcoins, despite the cost. And the announcement of the futures markets opening up within the next two weeks is adding to the excitement.

In fact, virtual currencies have become such a hot commodity that there are more than 100 hedge funds that invest only in Bitcoin and a few other crypto currencies.

So, despite the concern and doubts about virtual currency as a long-lasting and viable form of currency, a growing number of people are banking on it becoming even more useful and more mainstream in the future.

“The reason people own Bitcoin is because it’s a great store of value, possibly the greatest that has ever existed,” explains Jimmy Song, a programmer who works on the Bitcoin software.

The range of uses for Bitcoin and other virtual currencies seems to have no bounds, with stories circulating about buying homes and cars with this new method of payment. Only time will tell if Bitcoin sticks around, but right now the market is going crazy for it and showing a pretty positive outlook.

3 Comments

I fear the Futures Trading isn’t a good thing and this article from Wealth Daily backs it up, albeit I really hope it’s wrong. It’s up to all of us as cryptocurrency investors to do all we can to let big brother win another victory:

“When news that the two exchanges would be offering futures contracts hit, Bitcoin prices surged as fans of the cryptocurrency took the announcement as a good thing. They assumed the CBOE and CME would only offer derivatives on something they were optimistic about.
Well, let me tell you something about these kinds of companies. They offer derivatives on things they think can make them money. Plain and simple. And one of the main purposes of derivatives — be they options, futures, or forwards — is to bet against the underlying asset. They’re used to establish naked positions when a trader thinks the asset is going to drop in value. They’re used to hedge portfolios containing long investments in the asset against losses.
Sometimes, they are used as a bullish bet on the underlying security. But for the most part, they’re pessimistic.
Farmers enter into futures contracts on their corn, soybeans, and hogs to make sure they get a good price even if the market for those commodities drops. Traders scooped up credit default swaps (another form of derivative contract) to profit from the collapse of the U.S. economy.
So, this move by CBOE and CME doesn’t have anything to do with them being optimistic about Bitcoin’s price appreciation. It’s got everything to do with cashing in on massive amounts of trading volume. And it’s also about giving investors an option to bet against the cryptocurrency.”

I’m afraid you may be right 1000X. I have had a bad feeling about opening up a huge paper marketplace with the ability to short the heck out of BTC. We can see how paper trading has allowed the powers that be to suppress the gold market so impressively, and gold has a much bigger market cap than BTC. I’m crossing my fingers this isn’t really detrimental to the future of BTC.

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